Two of Canada’s highest-profile energy executives have publicly joined the
fight against plans by TransCanada Corp. to shift fees for moving
natural gas across the country, warning that the TransCanada proposal is perilous for the energy
industry.

Siding with TransCanada could hurt some 200 natural gas
producers and result in “less jobs created in Western Canada and less supply of
gas in Western Canada” Canadian Natural Resources Ltd. vice-chairman Murray
Edwards told a National Energy Board panel Monday in Calgary.

Energy

A pickup truck leads a haul vehicle at an oil sands mine near Fort McMurray, Alta., July 9, 2008. A new study shows that heavy metals including lead and mercury which are being released from oilsands facilities into the air and water of northern Alberta are already above levels considered hazardous to fish
The Canadian Press

Market View

Energy

Randy Eresman, chief executive officer
of Encana Corp., added that
Canada’s natural gas industry currently stands before an “opportunity to attract
a lot of third-party investment” with much of that capital coming from overseas.
But if TransCanada gets its way, he
warned, some of those foreign investors might shy away. “Things like these
changes could negatively affect their desire to want to invest in Western
Canada.”

The personal appearance by the two executives is unusual and comes amid an
increasingly high-stakes debate over the future of the Mainline, the TransCanada network of pipe that has, since the
1950s, carried Western Canadian gas to central and eastern consumers. The
Mainline has, in recent years, fallen victim to the declining fortunes of the
Alberta natural gas industry, which has struggled to compete against huge new
sources of natural gas located much closer to markets in Ontario, Quebec and New
York.

As a result, the Mainline is now flowing half-empty, and TransCanada has asked the NEB to approve a new way
of charging tolls that would see it offload some of Mainline costs on to the
TransCanada pipeline network that
carries gas around Alberta. Industry doesn’t like it because only a small
portion of the gas on the Alberta system moves on to the Mainline, so the cost
of moving gas that never touches the Mainline would also rise.

But TransCanada says its proposal
would raise Alberta tolls by about 5 cents per gigajoule, while lowering Mainline tolls by about
$1 – a shift that should, according to estimates brought before the NEB, raise
gas prices between 17 and 40 cents a gigajoule.

“We genuinely believe that our proposal will be beneficial to the producing
gas industry in the Western Canadian Sedimentary Basin,” said Steve Pohlod, vice-president commercial east for TransCanada.

What’s clear is that the debate over the tolls is a fractious one. On Monday,
Barry Jardine, a manager with the
Canadian Association of Petroleum Producers, called on TransCanada to make the Mainline more competitive
without turning to the NEB, saying: “Let’s be honest here. They’re big boys.
Stand up and take responsibility.”

TransCanada has argued that it
should not bear the full brunt of the bad times, since it runs a regulated
pipeline that was never allowed to fully reap the rewards of the good times.
Réal Cusson,
senior vice-president of marketing at CNRL, shot back: “If you don’t have any
more shippers on your system, you will be the proud manager of an asset that has
no customers.” He also questioned the modelling that predicted a lift in Alberta
gas prices: “It’s the principle of garbage in, garbage out. You can plug in any
number you want, any assumption you want, and get the answer you want,” he
said.

NEB chair Gaétan Caron then weighed in, with several references to
“the ultimate risk” of TransCanada being forced into a writedown on the
Mainline if it can’t revive its fortunes. He cautioned that “nobody wants to
dress for the funeral,” before asking pointed questions about how the NEB can
speed its review of tolls in a fast-changing market.

CAPP suggested creating and enforcing time lines as one possible
solution.

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